All posts tagged U.K. AAA

August’s public finance numbers spelled out more eloquently the government’s case for immediate austerity than any speech from Treasury chief George Osborne thus far. Read our coverage here.

At a time of increased anxiety over the looming prospect of deep and painful spending cuts, the data are a reminder of the benefits of acting early against the budget deficit, despite ongoing concerns that austerity measures could hamstring the economic recovery.

The numbers showed August’s net borrowing come in significantly above expectations, at £15.3 billion versus expectations of £13.0 billion. That’s the worst August since records began in 1993.

Key to higher borrowing was the 11% jump in central government expenditure in August, from a year ago. The reason: soaring central government interest payments on the debt.

In August, central government forked out £3.8 billion on net interest payments up from £1.3 billion a year earlier. That’s largely because rising inflation has forced the government to pay out much more on its index-linked debt, the U.K.’s stats office said.

The government seized on the data, saying “if [we] had not announced decisive action to bring borrowing down, debt interest would have been over £65 billion by 2014-15, more than is spent on schools or defense.”